6. Alex is the portfolio manager of the really Fund, a $100 million hedge fund that contains the following three stocks. The market return is 10% and the free rate is 2%. What rate of return should investors expect on this fund according to CAPM? ABC Stock A B Amount $20 million $30 million $50 million Beta 1.2 1.6 0.8 (a) 8.42% (b) 10.96% (c) 13.20% (d) 15.14% (e)17.28% 7. A portfolio is expected to return 10 percent in a normal economy, 14 percent in a boom economy, and lose 4 percent in a recessionary economy. The probability of a boom is 20 percent and the probability of a recession is 10 percent. What is the expected return of the portfolio? (a)8.52% (b) 8.73% (c) 8.96% (d) 9.11% (e)9.40% 8. What is the variance of the expected return in the previous question? (a) 0.0017 (b) 0.0022 (c) 0.0028 (d) 0.0034 (e) 0.0041 9. A year ago, you purchased 100 shares of Holland Enterprises, Inc. stock at a price of $12 per share. Today, you sold all of your shares for $11.4 per share. You also have received dividend of $0.50 per share before selling your stock. What is your total dollar return on this investment? (a) $60 (b) $30 (c)$10 (d) -$10 (e) -$60 10. A $1,000 portfolio is invested in two stocks (stock A & stock B) and one risk-free asset. Six hundred dollars is invested in stock A which has a be of 1.4. The rest of the portfolio is divided evenly between stock B and the risk-free asset. What is the beta of stock B if the portfolio is equally as risky as the market? (a) 0.8 (b) 0.9 (c) 1.0 (d) 1.1 (e) 1.2